Chances of a Capstone share buyback have increased: Raymond James

Capstone Mining Corp. announced this week that the TSX has accepted its plan to make a Normal Course Issuer Bid, something a Raymond James analyst says increases the likelihood of a share buyback this year.

“The announcement … may be a sign that Capstone’s management is unable to find a substantial asset at an attractive price and is looking for alternative ways to put its significant cash balance to use,” said analyst Alex Terentiew in a note to clients.

Mr. Terentiew said that he expects Capstone will likely continue to fish around for assets to buy until the first quarter of 2013, at which point it may look at other ways to make use of the money it currently sits on — which amounts to about $509-million.

“We continue to believe that should an asset not be found by end of 1Q13E, we expect Capstone to more aggressively pursue its share buyback, although issuing a dividend remains a possibility, in our opinion,” Mr. Terentiew said.

Of course, if Capstone does find an asset to buy and help growth the company, it could do some combination of an acquisition and a Normal Course Issuer Bid, said Mr. Terentiew.

“The pressure remains on Capstone’s management to find a reasonable use for its large and growing cash balance and possibly augment its near-term production growth profile,” he said.

Mr. Terentiew currently rates Capstone as an outperform stock, with a 12-month price target of $3.75. Capstone shares were last trading at $2.31 on the Toronto Stock Exchange as of Friday afternoon.

Investing Videos

Promoted by iShares by Blackrock

Active Investor was produced by Postmedia's advertising department in collaboration with iShares by BlackRock to promote awareness of this topic for commercial purposes. Postmedia's editorial departments had no involvement in the creation of this content.